As a day trader I had the opportunity to trade on many different platforms. I had a very specific trading style that required lightening fast decision making and execution. Before I would begin live trading on a new platform it was crucial that I spent time trading on a demo account in order to familiarize myself with all the features and the layout of the platform.
As I mentioned in a previous article, there is a specific advantage to using a binary options demo account as opposed to demo accounts with other types of trading.
Drawbacks to Demo Accounts in General
Trading a demo accounts was a vital way for me to accustom myself to a trading platform. It was of limited use in testing my actual trading strategy for two reasons.
- When trading equities in a demo account you don't actually purchase any stock. The execution prices are based on the current market prices, but you aren't actually purchasing or selling any stock. The computer always executes your trade at the best price in a demo environment. In a real trade you may or may not execute the trade at the desired price or at all. Furthermore, when you execute a real trade you can affect the market price of the stock. Demo trades are fake and can have no effect on stock price.
- Demo accounts take the emotion out of trading. Making trading decisions with your own money is much different than with fake demo money.
For the above reasons it is almost impossible to gauge a trading technique with a demo account.
Advantage of Trading a Binary Options Demo Account
There are several binary options trading platforms and many binary options brokers to choose from. It is highly beneficial to test the features and layout of a binary options platform with a binary options demo account. The binary options demo account has a large advantage over all other types of trading demo accounts. When you execute a binary options trade you aren't actually purchasing any underlying security. In essence you are betting against the binary options broker as to which direction the asset will trade. In this way the binary options demo trade exactly replicates a real binary options trade. Of course the emotional element of not using real money makes it difficult to fully replicate a live trading environment, but you will get a good feel for how your trading strategy will work by using a binary options demo account.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.